Trump Loosens Sanctions on Russian Spy Agency Linked to Election Hack

'Technical' adjustment lets U.S. companies sell products to Russia

Donald Trump
• February 2, 2017 6:00 pm


The Treasury Department on Thursday announced the loosening of sanctions on Russia's spy service that were imposed by former President Obama for Moscow's intelligence operations targeting the 2016 presidential election.

A notice posted on the website of the Office of Foreign Assets Control, the department's sanctions enforcement unit, stated the sanctions on Russia's Federal Security Service, the security and intelligence agency known as FSB, were eased.

The FSB was slapped with sanctions Dec. 29 by the Obama administration following an intelligence assessment that concluded the agency, along with the Russian GRU military spy service and senior Russian leaders, engaged in cyber attacks to influence the outcome of the election.

"We're not easing sanctions," White House Press Secretary Sean Spicer said, adding that Treasury made the change as "specific carve-outs" for industries or products.

A senior Treasury official who briefed reporters on the action said the measure was a technical and routine adjustment of the sanctions designed to help U.S. companies do business in Russia.

The sanctions on FSB are very much in place, the official said.

The official declined to comment on reactions from Moscow, including statements by former FSB director Nikolai Kovalyov who said the move signaled closer U.S.-Russian cooperation on terrorism.

"This shows that actual joint work on establishing an anti-terrorism coalition is about to begin," Kovalyov told the state-run TASS news agency. "This is the first step on the way leading to cooperation in the war on terror."

The Treasury measure followed requests from U.S. companies that were barred from selling some cell phones, tablet computers, and other information technology to Russia by regulations requiring FSB to approve the sales, the official said.

The U.S. products include cell phones, tablets, and wireless mice that use encryption technology designed to prevent disruption or interception of their operations. Russia's government uses the FSB to review and approve some foreign products that use encryption, a process that requires the foreign suppliers to pay the FSB a fee.

The sanctions imposed in December blocked U.S. companies from doing any business with the FSB.

Under the new rule, companies will be able to sell products with low-end encryption, including both hardware and software, as long as fees paid a company to the FSB do not exceed $5,000 annually.

Russia's FSB has emerged as a new incarnation of the Soviet-era KGB intelligence security service. It has imposed strict controls on all information products, technologies, and activities.

The White House announced in December the sanctions targeted "the Russian government's aggressive harassment of U.S. officials and cyber operations aimed at the U.S. election in 2016."

"Russia's cyber activities were intended to influence the election, erode faith in U.S. democratic institutions, sow doubt about the integrity of our electoral process, and undermine confidence in the institutions of the U.S. government," the White House said in a statement.

Nine entities and two agencies, the FSB and GRU, were sanctioned.

The sanctioned entities included the Special Technology Center in St. Petersburg that conducted electronic intelligence operations for the GRU, Zorsecurity, which assisted the GRU with technical research, and the Autonomous Noncommercial Organization "Professional Association of Designers of Data Processing Systems," which helped train GRU hackers.

Current GRU chief Lt. Gen. Igor Valentinovich Korobov and deputy GRU chiefs Sergey Aleksandrovich Gizunov and Vladimir Stepanovich Alexseyev also were singled out in sanctions.

Intelligence sources said one of the key Russian officials behind the presidential campaign influence operation was Col. Gen. Sergei Beseda, head of the FSB's Fifth Service, known as the Directorate of Operational Information and International Communications.

Beseda was sanctioned by the Treasury Department in July 2014 after Russia's military annexation of Ukraine's Crimea, an operation that included the most strategically significant Russian information warfare operations. Russia's aggression set in motion the conditions for the new Cold War currently underway with Moscow.

President Donald Trump has sought to play down allegations of Russian hacking and influence operations and is expected to seek to reset relations with Moscow.

A joint Department of Homeland Security and FBI report concluded that the election operation, codenamed Grizzly Steppe, was a Russian FSB and GRU operation. The report described it as "an ongoing campaign of cyber-enabled operations directed at the U.S. government and its citizens."

"These cyber operations have included spearphishing campaigns targeting government organizations, critical infrastructure entities, think tanks, universities, political organizations, and corporations leading to the theft of information," the report said.

A second report made public Jan. 6 was produced by the National Security Agency, CIA, and FBI. That report concluded "Russian efforts to influence the 2016 US presidential election represent the most recent expression of Moscow’s longstanding desire to undermine the U.S.-led liberal democratic order, but these activities demonstrated a significant escalation in directness, level of activity, and scope of effort compared to previous operations."

"We assess Russian President Vladimir Putin ordered an influence campaign in 2016 aimed at the U.S. presidential election," the report said. "Russia's goals were to undermine public faith in the U.S. democratic process, denigrate Secretary Clinton, and harm her electability and potential presidency. We further assess Putin and the Russian Government developed a clear preference for President-elect Trump. We have high confidence in these judgments."

The FSB is currently undergoing an apparent political purge, as two of its top officials involved in information operations, along with a former FSB official working for the Russian cyber security firm Kaspersky Lab, were charged with treason.

Reports from Moscow revealed that Sergei Mikhailov, chief of the FSB Center for Information Security, and his deputy, Dmitry Dokuchayev were accused of treason and collaboration with the CIA.

One Russian news report stated that Mikhailov was not arrested recently, but during a session of senior FSB leadership had a bag placed over his head and was then taken out of the room by guards.

Dokuchayev was once a Russian hacker known by the handle Forb who worked for FSB as part of a deal to avoid jail for his hacking operations, The Guardian reported.

A third target, Ruslan Stoyanov, Kaspersky's chief of computer incidents investigations, was arrested several weeks ago. The company said the charges were not related to his work at Kaspersky.

In all, four people have been arrested and another eight are said to be witnesses.

The arrests fueled speculation around the world that the three suspects may have been sources for the CIA and that they were identified after the two U.S. intelligence reports revealed the Russian election hacking operation.